Mesa: Code-Share Potential

"We recognize that the airlines have
not been good investments," says Jessica Chiaverini,
contributing editor to The Buckingham Report and co-manager of The Al Frank Fund. "But
we own one that appears to offer excellent long-term potential with a bargain
basement price tag."

"Mesa Air Group (MESA NASDAQ) is a holding company whose principle
subsidiaries operate as regional air carriers providing scheduled passenger and
airfreight service. Approximately 98% of fiscal 2003 passenger revenues were
derived from operations associated with code-share agreements with America
West Airlines, Frontier Airlines, Midwest Airlines, United, and US Airways.
These agreements allow use of the code-share partners' flight designator
code to identify flights and fares in computer reservation systems, permit use
of logos, service marks, aircraft paint schemes and uniforms similar to those of
the code-share partner, and provide coordinated schedules and joint advertising.

"Mesa Air receives a guaranteed payment
based upon a fixed minimum monthly amount plus amounts related to departures and
block hours flown, plus direct reimbursement for expenses such as fuel, landing
fees and insurance. Third quarter pro-forma earnings per share improved to $0.28
on revenues of $239.6 million, from earnings of $0.24 per share and revenues of
$154.1 million a year ago. During the quarter the company added eight regional
jets to its current fleet bringing the total number to 124. Commenting on the
results, Mesa's Chairman and CEO Jonathan Ornstein said, ‘Given the current
industry environment, we are particularly pleased with our financial results.
This is our 6th quarter of improving earnings and our 23rd profitable quarter in
24 quarters. While we will undoubtedly face challenges going forward, we believe
the company is well positioned financially and has the ability to take advantage
of potential opportunities.’

"The results thus far in the fourth quarter have been
terrific. Of course, the bankruptcy of US Airways is not exactly a positive, so we
have chosen to trim our fundamental goal price to $12. Nevertheless, the
major airlines are beginning to recognize the value of the
increased utilization of regional jets, which are primarily operated by independent
regional airlines such as Mesa. The company is prepared to take advantage of
further opportunities that may arise by continuing to focus on
maintaining its operational excellence and competitive cost structure. The stock trades for just 5.4
times earnings and 1.4 times book value. With oil prices having retreated somewhat from recent
highs, now may be the time to pick up this undervalued company. The consensus earnings
forecast is for profits of $0.97 per share this fiscal year (ends 9/04)
and $1.23 in fiscal 2005. Our buy limit is $6."